Short commentary on Eastern Suburbs' real estate market statistics for February 2019
February has been so short and we are now in the start of autumn! Along with the weather, the real estate market for the Eastern Bays (i.e. Kohimarama, Orakei, Mission Bay, Glendowie, St Heliers) and Remuera has cooled too in terms of sales and sales price. However, this is not at all out of sync with the rest of Auckland, and the desirability of these suburbs continues to support prevailing prices (compared to the other parts of Auckland for e.g. North Shore).
However, there was an increase in listing stock in late February and early March as more homeowners return from their holidays and list their homes on the market (Auckland: +6.7% from 9,588 to 10,234 – an additional 646 properties).
If you are impatient (!), you can skip to the relevant sections:
Auckland's property market statistics for February 2019
Compared to January 2019
Compared to February 2018
- Median price up 5.6%
- Sales Count up 15.8%
- Days to Sell increased by 6 days
- Median price down 0.6%
- Sales Count down 17.9%
- Days to Sell increased by 8 days
Average residential property value in Auckland was 0.6% lower in February 2019 than it was in February 2018. This occurrence of average prices being lower than the previous year has been persisting for 3 months, suggesting that the Auckland market is definitely experiencing a decline in values.
However while house prices are decreasing, the decline has been minor – prices in fact seem to hold indicating that the market is plateauing rather than collapsing. This is most certainly because vendors are now more accepting that it’s taking a while longer to sell and those who cannot reach the price they want either are patient enough to wait longer or just pull it off the market completely. Low mortgage rates and few mortgage repayment problems have reduced any pressure to force through quick sales for low prices. As I’ve mentioned in previous market updates, I expect this ‘Mexican stand-off” between vendors and buyers to continue persisting in the absence of any substantive external economic shock.
That being said, vendors with realistic price expectations will still sell. Vendors hoping to break even after buying at the peak of the market (last 2 -3 years) may certainly face some issues (as the heat is out of the Auckland residential market) unless they bought at a huge discount and have added value.
According to the latest Pain & Gain report by CoreLogic, less than 5% of all Auckland homes were sold at a loss between October and December 2018. And of this percentage, resale losses were more common for apartments. That means that more than 95% were actually making a gain – great news for homeowners. For owners to make a profit, on average, they need to have held for 7.6 years (Pain & Gain report). Properties that have been renovated are held for longer and are more likely to turn a gross profit than those that haven’t. In Q4, 99.7% of resales that had previously had a building consent issued against them were sold for more than the original purchase price.
However, I would be really wary about taking this at face value, and go overboard on a renovation binge – you will likely find that the return on investment can actually be negative in some cases. Rather than splurging $30,000 on a full kitchen remodel, you can consider ditching your unmatched old appliances and spending $4,000 on a new stainless steel appliance suite (i.e. oven, stove, sink, dishwasher). Small upgrades can have a big impact.
Speak to me or your trusted real estate salesperson if you are thinking of any such renovations.
Prices will Hold
In my humble opinion, prices are unlikely to drop drastically when banks remain keen to lend to the best of borrowers. Competition at that end is extremely fierce. In fact, HSBC has recently launched a 2 year special rate of 3.69%, unheard of in the New Zealand residential mortgages market.
The Reserve Bank has also indicated that interest rates will remain low for an extended period of time. All these means that buyers have higher borrowing capacity and can access properties of a higher value. Plenty of first home buyers are still out there looking and keen to get onto the property ladder now that they’ve seen that prices are not running out of reach, and they continue to save hard for their deposit. In fact, I’ve just sold one in One Tree Hill to the loveliest pair of first home buyers who are thoroughly excited about being able to move into their new place (and I share their excitement!)
Eastern Suburbs' market statistics and general observations
Covering the real estate market of Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank, Glen Innes, St Johns, Stonefields and Wai O Taiki Bay
Note 1: Suburbs with less than 5 sales (for e.g. Wai O Taiki Bay) will not have the median property price displayed for statistical and privacy reasons. Also, note that the median property price for each suburb may see large fluctuations given the relatively low number of sales on a monthly basis.
Note 2: The REINZ uses unconditional sales data (when the price is agreed) rather than at settlement, which can often be weeks later. It is therefore more accurate and timely.
What you really need to keep a look out for:
But storm clouds remain on the horizon. Amidst the chatter about capital gains tax (which has been discussed to death even when the government has yet to outline its position and the proposals by the Tax Working Group that it wishes to adopt), what is on the immediate horizon and has a huge potential of changing the property market is that of the Reserve Bank’s bank capital proposals. If it passes, the Reserve Bank’s current proposal to significantly increase bank capital requirements will have a huge impact on the lending capacity and interest rates (residential mortgages, commercial etc.) of major banks in New Zealand (i.e. ANZ, BNZ, Westpac and ASB). Given that lending is the lifeblood of any market economy (just witness the carnage back in 2009 when the credit markets seized up), any such move will likely lead to credit rationing and funding issues. The impact on the housing market will be huge, especially when there are flow on effects on the Kiwi businesses.
Another dark cloud is that of statistics. Yes, boring statistics. Statistics NZ’s new system for measuring migration flows suggests net migration is significantly lower than previously stated. Based on that system, the net population gain from migration may be around 27% lower than the previous data. The implications of this on the property market is obvious – that the shortfall in housing (and corresponding pent up demand) may be less than what was previously known. That’s obviously not to say that there isn’t any shortfall at all. There remains significant and increased activity in first home buyers (compared to 2018) from the Reserve Bank’s mortgage lending statistics.
Trends in Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank, Glen Innes, St Johns, Stonefields and Wai O Taiki Bay real estate markets
Oneroof recently had an article indicating that Remuera lost its billon dollar status – meaning sales amount to over a billion dollar a year.. However, that’s more to do with number of sales decreasing (362 properties sold in 2018, down from 451 in 2017) than house values decreasing.
This is an uncertain market to predict.
At Ray White, we have seen a few properties that do not sell at auction and then are subsequently priced. Yet, at the same time, we see plaster homes selling at auction with 4 bidders. Properties around 700K are passed in at auctions (although subsequently sold) and properties at $4-6M are still being sold at auction. Median days to sell has certainly increased significantly, pointing to strong resistance amongst buyers to just buy anything and everything. But this is unsurprising given that these areas comprise of properties on the higher-end of the price spectrum and the buyer pool is necessarily smaller (real buyers for Ferraris are less than those of Nissans).
At the end of the day, buyers at all price ranges are still out there but they are pickier. Your house just needs to represent good value and marketed well.
As of 14 March 2019, there are 519 listings on the market and just 84 completed sales – this indicates that alot more properties are sitting on the market and buyers clearly have lots of choices.
So Is Now A Good Time To...
Sell In The Eastern Suburbs?
When looking to sell, vendors are naturally concerned about costs of a potential sale, especially in this market. As a fan of learning from other markets and always looking for ways to innovate and improvise, I’ve introduced my clients to a specific technology that promises to bring the “wow” without the associated cost in terms of staging.
To me, every cent counts – the money can be better put to use in digital marketing. In this Auckland property market, you certainly want to be cost-conscious and know where your best bang for your buck is. And this resonates with my personal philosophy – I will only recommend a particular course of action if I truly believe (and will utilise) it if I own the property.
Your money is treated like my money and never spent on self-promotion (of the salesperson). Forget those big “just solds” or “know your market value” advertising – what do these have to do with marketing your property? What I do want is the best return for every single cent I spend on marketing of your property to maximise eyeballs and the buyer pool. This in turn maximises your chances of success.
Concerns with Cross Lease
If you own a cross-lease, then you should absolutely be careful and do your homework before going on the market. Get an agent that is familiar with the legal fine print and nuances, who can work with your lawyers and better advise you on resolving/minimising such issues. (Fun and unrelated fact: A woman won $10,000 for reading the fine print. A travel insurance company buried the prize to encourage customers to pay attention.
The Right Way To Sell In This Market
Under current market conditions where buyers are extremely picky, the best way to go wrong is to continue operating as if the market has not changed since the heydays of 2017 and that buyers are dying to buy your house with auction clearance rates above 80%. After years of being in a seller’s market, the pendulum has certainly swung in favour of buyers now (not to say that we are in a buyer’s market). Finding buyers and making those emotional connections via modern channels where they lurk (just look at the stunning usage numbers below) are critically important so give yourself the best chances of success by choosing your real estate salespersons and examining their marketing plans very carefully. No matter how good the negotiating skills of the real estate salesperson can be, there’ll be no one to negotiate against if there are no interested buyers.
People are sometimes drawn to salespersons that have alot of listings because they think they will have a huge database of active buyers. However, the truth is that those buyers are on their database because they are active and therefore will be actively looking for properties on their own and not loyal to any particular salesperson. What we do need to tease out are those passive buyers that are randomly browsing on their phone and have had no intention of buying till we present and package that home in front of them.
In fact, salespeople with too many listings have two issues.
One is that they simply do not have enough time to dedicate to your listing – every one of us has only 24 hours a day.
Two is a potential conflict of interest. Think of it this way. Assume what the salesperson says is true – that he has lots of buyers because he has 10 listings on the go. Now if a buyer strolls through your property and express any slight objection (for e.g. bathroom looks old), how can you be sure that that salesperson will not quickly show the other listings rather than trying his/her best to sell yours? In other words, the tables can equally be turned on you. It’s of course OK to pick that salesperson. Just be aware of the risks.
And here’s a suggested response for those who say that they have tons of buyers on their books and hence you should give them your listing. Simply ask that agent to sign a general listing for a short period of time to bring such buyers to you. Surely that isn’t too hard if such buyers really do exist. If they manage to sell your house this way, then you would have saved on the marketing and hassle. Win-win!
Buy In The Eastern Suburbs?
The million dollar question: should you buy now or wait for the market to “fall even further”?
Buyers today have much more access to information. There is definitely a lack of urgency in the market as buyers think there will soon be another similar house going on the market. There is no more fear of missing out. The bigger fear is the fear of buying too high. This fear is unfortunately holding people back and can in fact cause regret.
I’ve worked with buyers who refused to go higher during the auction (‘principles!’) – and I am talking just two weeks ago – and are now regretting their decision because they cannot find anything suitable thereafter. They have even asked whether they can buy their dream home off the new purchasers and let them have a profit.
There are some great buys out there in the market right now – but only if you dare to act. Sure the market might slide a 5% further, but if it’s a house that you love and you plan to stay there for another 5 years, then there is really no harm to buying now if you consider the tangible and intangible benefits (and costs) of owning that new home. Mortgage interest rates are at an all time low, and are poised to go lower.
Human psychology can certainly be interesting (and a huge driver of the market) – if the prices drop by 5%, many will say that they shouldn’t buy now because prices will be cheaper soon. Another 5% later and they will still be saying the same thing, but with greater conviction. But at what point should prices stop falling then before these buyers make a move?
Immigration numbers have certainly eased (as outlined above) but show no signs of being cut off entirely. The pace of building remains generally unchanged, which means the shortfall in housing remains unaddressed. Market support for existing prices remain strong, short of any substantive external shock. And if one hits, will you really be buying anyway?
All that being said, just make sure you are prepared for the costs of ownership and that the house suits your needs. Work with me today and enjoy the benefits, cost savings and insights I get from being in the property trenches on a daily basis – for free.
Found this post useful and have more questions?
I have detailed statistics at my fingertips, including recent sales within the Eastern Suburbs (or any suburbs), so do not hesitate to contact me for a no-obligation discussion over coffee on your future plans to either buy or sell.